Facebook Hits New High: Targets Rise as Zuckerberg’s Tone Impresses

By Tiernan Ray

Facebook's (FB) CEO Mark Zuckerberg seems to have impressed the Street with his appearance yesterday at TechCrunch's “Disrupt” conference in San Fracisco, during which he remarked that he had been too fearful of his company going public for too long, and that tech entrepreneurs need not be so worried about the process.

That talk in fact pushed the stock yesterday above the $45 high on the day of the IPO, and the stock hit a new high of $45.62 this morning, and is currently up 13 cents at $45.17.

Topeka Capital Markets's Victor Anthony, reiterating a Buy rating and a $47 price target, was encourage by Zuckerberg's “confident” tone at the conference:

Mark Zuckerberg appeared more confident this year with his presentation focused on the longer-term vision for Facebook, which for him is to stay focused on their mission of connecting everyone in the world and give them the tools to share more. The company is currently being retooled to tackle the problems that would help fulfill their mission of connecting the next five billion people, although he admits that the task is difficult given the lack of Internet access in many parts of the world. Over the next 5-10 years, he would like to understand everything in the world semantically and “map everything out.” FB would also like to play a role in creating companies and jobs, we assume he means leveraging the platform to enable companies to grow. Along those lines he cited three pillars to the platform strategy – build (tools to enable more efficient development), grow (FB as a distribution platform), and monetize. He called out the mobile app install unit as one of the biggest initiatives which is growing quickly. He noted that developers are relying on FB as the primary means of marketing their apps.

There have been a couple of price target increases today, by J.P. Morgan and CLSA Asia-Pacific Markets, citing strong trends in the business.

J.P. Morgan's Doug Anmuth, reiterating an Overweight rating, raises his target to $53 from $44, writing “We believe that momentum in the ad platform continues as marketer feedback around Mobile, News Feed, and FBX continues to improve along with ROI.”

Anmuth's raised his estimate for this quarter to $1.75 billion in revenue and 2 cents per share in profit from a prior $1.69 billion and 19 cents, after concluding the company has been adding clients at a decent clip this quarter, including ads for TV shows and other media types:

During 3Q we believe Facebook has expanded its advertiser base,witha notable pick-up in Entertainment industry ads across TV shows, movies, and console game launches.These ads often featureclick-to-play video—which bodes well for Facebook'slikely more formal launch of News Feed video ads in coming months— and they likely command premium pricing based on guaranteed timing and the more advanced format.

For 2014, Anmuth raised his estimate to $9.9 billion and $1.09 per share from a prior $8.8 billion and 98 cents, given that recent feedback about newer initiatives, such as mobile ads and the “Facebook Exchange” is increasingly positive:

Our anecdotal checks suggest that FBX ads have increased notably in the Desktop Right Rail—often representing the majority of ads shown—and marketer feedback after a few months of FBX in the Desktop News Feed is positive. Triggit data across 90 campaigns and 4.9B impressions suggests increased FBXads in the Desktop News Feed and increased adoption ofdynamic ads are driving a 27x increase in click-through rates (CTR) and a 50% decrease in eCPC (implying a 13-14x increase in CPMs) since the end of 2012. Desktop News Feed FBX ads began in May of this year and they are becoming more prevalent, but we would also expect them to extend into the Mobile News Feed in coming months, thereby increasing the relevance and quality of mobile ads. Advertiser targeting should also improve going forward as Custom Audiences becomes easier to use.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.